Correlation Between Terawulf and Iris Energy

Can any of the company-specific risk be diversified away by investing in both Terawulf and Iris Energy at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Terawulf and Iris Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Terawulf and Iris Energy, you can compare the effects of market volatilities on Terawulf and Iris Energy and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Terawulf with a short position of Iris Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Terawulf and Iris Energy.

Diversification Opportunities for Terawulf and Iris Energy

0.84

Correlation Coefficient

Terawulf  Iris Energy

Very poor diversification

The 3 months correlation between Terawulf and Iris is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Terawulf and Iris Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iris Energy and Terawulf is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Terawulf are associated (or correlated) with Iris Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iris Energy has no effect on the direction of Terawulf i.e., Terawulf and Iris Energy go up and down completely randomly.

Pair Corralation between Terawulf and Iris Energy

Given the investment horizon of 90 days Terawulf is expected to under-perform the Iris Energy. In addition to that, Terawulf is 1.15 times more volatile than Iris Energy. It trades about -0.1 of its total potential returns per unit of risk. Iris Energy is currently generating about -0.09 per unit of volatility. If you would invest  994.00  in Iris Energy on December 29, 2024 and sell it today you would lose (387.00) from holding Iris Energy or give up 38.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Terawulf  vs.  Iris Energy

Terawulf

Risk-Adjusted Performance

Very Weak

Over the last 90 days Terawulf has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Iris Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Iris Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Terawulf and Iris Energy

The main advantage of trading using opposite Terawulf and Iris Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Terawulf position performs unexpectedly, Iris Energy can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Iris Energy will offset losses from the drop in Iris Energy's long position.

The idea behind Terawulf and Iris Energy pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.